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Health Care Law

CMS expands reimbursement cuts on 340B drugs

On November 2, 2018, CMS issued the CY 2019 OPPS/ASC Final Rule, further cutting reimbursement for 340B Program purchased drugs. CMS finalized its proposed rule and expanded the reimbursement reductions for separately-payable drugs purchased under the 340B Program to non-grandfathered (non-excepted) off-campus provider-based departments.

Starting on January 1, 2018, CMS had already reduced reimbursement on separately-payable drugs purchased under the 340B Program administered in grandfathered (excepted) off-campus provider-based departments. The reimbursement under OPPS for these drugs was reduced from average sales price (ASP) plus 6 percent to ASP minus 22.5 percent. In the 2019 Final Rule, CMS continued this payment reduction for all separately-payable Medicare Part B drugs (i.e., those assigned status indicator “K”).

In addition, the payment reduction has now been extended to non-grandfathered (non-excepted) off-campus provider-based departments. Drugs purchased under the 340B Program in non-excepted provider-based settings will be reimbursed at ASP minus 22.5 percent — the same as in excepted provider-based locations. CMS believes these further reductions will continue to better align the resources and acquisition costs of the drugs, thus lowering cost to the entire system and, ultimately, benefiting Medicare beneficiaries. In addition, the uniformity of reimbursement would remove the incentive CMS believes hospitals have under the CY 2018 reimbursement system to shift pharmaceutical-intensive care delivery to non-excepted provider-based departments.

CMS also clarified, reaffirmed or initiated several other 340B Program-related points in the Final Rule:

The reduced rate for both excepted and non-excepted provider-based locations applies uniformly to drugs reimbursed based on wholesale acquisition cost, average wholesale price and ASP.

CMS will reimburse separately-payable biosimilars acquired under the 340B program at ASP minus 22.5 percent of the biosimilar’s own ASP, rather than the ASP of the reference product.

CMS will reimburse new drugs and biological products, before ASP data is available, at wholesale acquisition cost (WAC) plus 3 percent, rather than the prior rate of WAC plus 6 percent.

Based on these changes, 340B covered entities will again have to re-evaluate the financials of their provider-based locations, particularly in light of the other provider-based reimbursement changes contained in the Final Rule.